Normally, when a person (called the debtor) files for bankruptcy, property owned by that person becomes the property of the bankruptcy trustee. As a bankruptcy attorney, my goal in my job is to find as many ways as possible to keep the debtor's personal property out of the hands of the bankruptcy trustee.
There are three primary ways to keep property out of the hands of the bankruptcy trustee. Each of those ways will now be discussed in turn.:
The first – and primary – way is if the property is exempt. The law provides that a certain amount of property is exempt and is automatically excluded from the property taken by the bankruptcy trustee. For example, there are exemptions for household goods and furnishings, motor vehicles (up to a certain value), jewelry, and many others.
Some states – in Minnesota is one of those states – permit debtors to choose between the exemptions provided by federal law and the exemptions provided by state law. Most of the time, the federal exemptions are the most appropriate. I especially like the wildcard exemption provided by federal law – that can cover any property, such as a lawn more, that would not normally be exempt.
The second way is for a debtor to reaffirm the debt. Reaffirm is a fancy word for continuing to make the payments. Most often, if a debtor is making monthly payments on a particular item of property, such as a motor vehicle, and the creditor – the person to whom the money is owed – could repossess the property unless the payments in such a case, the debtor might reaffirm the debt, or promise to continue to make the monthly payments in order to keep the property reaffirmation agreements are most common for motor vehicles, but sometimes exist for mortgages as well.
Most of the time, the exemptions, combined with reaffirmation agreements, cover all of the property that a debtor may own. However, if the trustee seizes an item of the debtor's property, the debtor can offer to buy that property back from the trustee. That is the third option, and it primarily comes up when the debtor is a small business with a large inventory or a lot of equipment.
Baland Law Office, P.L.L.C. represents consumer and small business debtors in both Chapter 7 and Chapter 13 bankruptcy proceedings. Please note that only individual debtors can file for Chapter 13 bankruptcy relief, not businesses. Please call (763) 450-9494 to schedule an appointment to discuss your situation today and find out whether declaring bankruptcy is the right option for you!
DISCLAIMER: Baland Law Office, P.L.L.C. is a debt-relief agency, and Timothy H. Baland, Esq. is a debt-relief agent. We help people like you to obtain bankruptcy relief.
WARNING: The information contained in this article does not constitute legal advice and may not be applicable to your situation. Reading this blog post does not create an attorney-client relationship between you and Baland Law Office, P.L.L.C. You should always discuss your situation with an attorney before taking any action based on what you may read in this blog. To that end, please call (763) 450-9494 to set up an appointment to discuss your situation.